Five9, Inc. (FIVN) Earnings Call Transcript & Summary

Good morning, everybody, or good afternoon, depending on where you're attending this session from. My name is Catharine Trebnick. I am a senior analyst here at Rosenblatt. I cover communications and cybersecurity. And I have with us Barry Zwarenstein, CFO of Five9; Dan Burkland, the CEO; and Jonathan Rosenblatt (sic) [ Rosenberg ] who I know for many, many years of my days at Bell Labs. Also, who's the Chief Scientist and Head of AI. Is that a good way to describe your job there, Jonathan?

Yes. Close enough.

Okay. All right...

And Catharine, before we jump into the actual question, sorry to interrupt you, I'd also like to make a brief safe harbor statement. So today, we're going to make comments and -- about events and trends in the industry, affecting the company, AI and the like. Obviously, real results may -- actual results may differ from what we say. I refer you to our filings with the SEC, 10-K, 10-Q for factors that could cause such a difference. Thanks, Catharine.

Yes. Sure, certainly. All right. So we're going to kick it off. Just 1 housekeeping session. If you'd like to submit a question, there is a button on the bottom of your screen that you can submit the question for, and then we'll address it. So we appreciate that. And to kick it off with, I thought I'd start with just the sales landscape in general. Could you describe any key changes in the software sales environment over the past 3 months or even the past year that really relate to the Cloud Contact Center and the solutions and adoption?

Absolutely. Hi, Catharine. And hello, everyone. Yes, I think taking a step back for a second, let's just talk about what Five9 does first. We're on a mission to change the game in customer experience for some of the largest enterprises and the largest brands in the world. And we're helping them reimagine the customer experience for their customers. And we're doing that by providing what we call our intelligent CX Platform. But you think of our SaaS platform as an AI-driven, very important, AI-driven platform. It's a data-centric platform. And we're helping, again, some of the largest brands. We'll talk about some of the large wins we've had recently. We're helping them change the game in CX. And we've seen an inflection point in this market to talk about what we're seeing in the demand side of the equation. I'd say about 5 quarters ago, Catharine, we saw this dramatic inflection in RFP flow. It's a perfect metric to really think about the top of the funnel activity and demand in the market. Again, 5 quarters ago, we saw the RFP flow double, literally double overnight, and it's maintained that high watermark for the last 5 quarters. To us, that was the first indicator that this shift to the cloud and the catalyst that AI is providing, especially for companies like ours that are AI-led, it's a wonderful time to be in this market. I'll give you a couple of metrics that kind of what we talked about in our last earnings calls. In Q4, we had 17% of our ACV bookings, those are dollars, 17% of our bookings were AI and automation. And in this last quarter in Q1, we talked about AI and automation bookings actually increasing 15x, 15x on a year-over-year basis. So is -- AI is becoming a huge part of our business, and we're really excited about the long-term durable growth opportunity in customer experience. And again, it's not just contact center, it's AI as well.

So as long as you brought up AI, let's flip it over and look at, some people predict human agents will be replaced by AI. And Jonathan, what do you think about that? I'll hand that one to you.

Well, Catharine, can I start? Sorry. Jonathan, I want you to double click on this. But Catharine, I think the simple answer is, when we think about that thesis, we actually hope it comes true. We're very excited to see AI take over interactions because, guess what, we sell software that -- provides that AI solution set to these large brands. And our revenue per interaction for AI software is actually double that of a software revenue for powering a human agent. So we actually kind of take this to the extreme case. Let's assume for a second that, that thesis is taken to its extreme case where 100% of customer interactions are automated with AI. Our TAM goes up by double. Our addressable market doubles if that happens. So we are so excited about this AI opportunity. And I think there's some confusion in the market as to whether or not Five9 and, quite frankly, other CCaaS providers are going to benefit or not from AI. And we're going to tell you it's a huge tailwind. It's a huge TAM expansion for us. Again, double the revenue per interaction. That means double the revenue per brand or enterprise as we provide AI software instead of software for human agents. And then the next question is, okay, so what's -- why is Five9 going to win its fair share of that AI opportunity? And I guess I'll turn it over to Jonathan to actually talk about our competitive differentiation.

Yes. So this is really important too, and I think it's really the fundamental question for people to answer is like given it's a TAM expansion, what is the right to win, and why do we at Five9 think we're going to claim a significant amount of the share in this market? It has to deal with this fundamental observation that in order to deliver this, in order to bring this generative AI capability to customer experience, there's got to be this platform in the middle that sits between like the large language model, like the raw engine that everyone is all excited about, and the brand and their customers from it. And there's 3 big things that you have to do with that platform that we think we have extreme competitive differentiation. And the first is you have to have access to channels. At the end of the day, customers are going to reach out. They're going to place a phone call. They're going to go to a website and click on a button. They're going to send an e-mail. They're going to send a text message. They're going to communicate through WhatsApp. These are what we call channels in our industry. And those channels route to our platform today for the 20 years of installed base that Five9 has been accumulating and the many more yet to come. And these form -- and these are change, difficult to move, extremely difficult to implement, especially if you get into the voice area. And voice just got accelerated with the recent announcements. You saw this chatgpt 4.0 -- 4o sorry, fully bring voice to the forefront. We looked at them and like, holy cow, like these even double clicks on the importance of voice access to communicate with this technology. Vendors who are able to connect to those channels and bridge them into the AI have an advantage. And we have a massive installed base and technology stack that we think is a really serious form of differentiation. That's one, access to channels. Number 2 is access to contextual data. This GenAI is only as good as the data you feed it and the prompts. It's probably something people are hearing a lot about is prompting and prompt engineering. It's giving the GenAI sort of training it on real-time data meant to answer the -- to drive that particular interaction. And a lot of where that data comes from are sources that Five9, that our platform plugs into and has been plugging into. A lot of it is integration with back-end systems. So for example, Cath, let's say, customer wants to calling us with -- have a conversation with an AI about their most recent bill. Well, you got to plug into the billing system. That's not magic. I mean, all the AI in the world doesn't do anything. You can't feed it the bills, right? So Five9 has a technology platform that's all about these integration to back-end systems. And not just a tech stack, we have like decades of installed base of existing customers that we've done all the heavy lifting, [ functions ] in our implementation of GenAI, it's on top of that platform, leveraging that for customers access to contextual data, right? And then the 3 is access to experts, right? Because at the end of the day, customers don't want an LLM or a GenAI. They want a business outcome. And it takes people to understand those business outcomes, understand how to set up the system, train it, monitor it, track it, configure it, make it work, and deliver those outcomes. And it doesn't require people to do. Requires a software that those people can use. That's what our product does, everything from configuration to reporting to analytics to measurement. And Five9's high-touch capability provides the humans that do that for the customer to achieve those outcomes. We think you need those 3 things, and those are 3 incredible strengths that Five9 has that we believe give us a significant right to win in this market.

Is there any unique use cases you're seeing from all these RFPs that are coming in that have to do with incorporating this AI that you're providing?

Yes. There are several, Catharine, and we probably don't have the time today to go into details. But again, suffice it to say, the customer experience is becoming more and more dependent on AI technologies to provide personalization. So I'm going to just answer your question a little more generically and say, when it comes to -- we're all consumers, right? We all interact with brands all the time, digitally, voice, websites, mobile apps. We want a personalized experience with that brand no matter what. We want the brand to know who we are, what products and services we have purchased from them, what our problems have been in the past, who we interacted with, what the problems were in the past, whether, again, with -- regardless of the channel. These are all very good examples of the need for personalization. And the only way to deliver that personalized customer experience through AI is to have the contextual data, as Jonathan said, and have access to all the channels and have the experts. So I think it's just -- it's a wonderful setup in terms of the way this market is setting up and our position in it.

Would you say then that would contribute to the latest deal that you announced in May, that your breadth of capabilities are much broader than the 5 competitors that you beat the market with?

Yes. I mean, I think our recent announcement of GenAI Studio, for example, is a perfect example of us getting out further ahead in AI. And again, we started this journey well over 4 years ago. Four years ago, we've acquired Inference, right? That was the leading IVA solution. But we were already in the lab. Jonathan and his team were in the lab developing AI solutions for CX even before that. And GenAI Studio is just the last of a number of AI innovations that we've delivered to the market. I think we're up to 9 separate products that are AI products in our portfolio. GenAI Studio's just the latest. And again, it's a first -- industry first that allows enterprise brands to combine the best-in-class engines, whether that's, again, the latest and greatest GPT-4o or other engines with the contextual data in real time that's running through our platform, that leverages all the integrations that our platform already has to back-end systems. That is just an example of our leadership in AI. And by the way, don't believe us. I mean, look at all the surveys that are out there, industry surveys, channel surveys, industry analysts, everyone is putting us on top, well on top in terms of AI leadership in this industry.

So is there -- are you seeing any change in your sales elongation or shortening of the sales cycle because there's more interest in AI from the buyer side? And then -- how -- and how are you seeing that evolve in the next year?

Yes, Catharine, that's a great point. There's offsetting factors here in terms of AI and sales cycles. And they're -- again, the offsetting factors are these enterprise brands do need to look at the AI solutions from the various vendors, and it takes extra meetings to do that, and we love having those meetings, obviously. We just talked about our leadership. So yes, we have more meetings. But at the same time, there's an offsetting factor in that sales cycle, and that is the sense of urgency, which has absolutely increased. And it's increased for multiple reasons. They want to get deployed with AI, for one, but it's also there's a push. So there's a pull from AI in terms of urgency, but there's also a push from the legacy on-premise end-of-life announcements from some of our on-premise competitors that have, again, end-of-life their on-premise solutions, which is another great trend for us.

So there are more competitors, obviously, in the space and then how are you addressing some of the competitors?

Yes. So Catharine, it's interesting. From a competitive standpoint, look, for large enterprises, like the Fortune 50 bank, the large financial institution, we just announced a $50 million ARR win with, and that's ARR, not TCV, not total contract value, just much larger obviously. We're winning those in large part because of our leadership in AI and it's front and center. It's a big differentiator for us.

And then -- now that you brought up the large bank, could you differentiate for us why you were selected over a host of competitors? I believe there were 4 or 5 other legacy vendors in there, and I know that they had a strong relationship over the years with Google. So there's probably another competitor by the name of UJET that might have been in there. So elaborate on why they selected you over the cast and characters that were also responding?

Sure. Happy to, Catharine. I would say 3 main reasons. And again, we're being redundant here, but AI leadership was a big part of why we won that deal. I would say scalability and reliability, right? I mean, it takes years to deliver a platform like we have. And we're on top in terms of scalability, being able to handle tens of thousands of human agents as well as virtual agents as well as digital interactions. That scalability of our platform and reliability of the platform is showing through in these large enterprise wins. And I would say the other factor -- well, there's 2 others. Actually, I'm going to go 4 total. It's AI, scalability, reliability is 2. The third is referenceability of these large enterprises. We talked about the parcel delivery service company. We've talked about the health care conglomerate, and the insurance conglomerate. I mean, these are massive customers that are highly referenceable and that matters. And then I would say fourth is our people. As Jonathan said, you need the experts to do the implementation for these large brands. They're trying to -- I've talked about this a lot about I equate a migration from on-premise CCaaS to any cloud platform as a heart transplant. And think of it actually as a heart transplant, while the patient is still up and walking around. They've got to keep running their business, while they make this migration. And our professional services team is second to none. We have expertise. We have track record. We have ACS, which helps us from a technology standpoint. So think about it as -- if you think about the analogy of heart surgery or heart transplant, you have to have the best surgeons, and you have to have the best operating theater, as Barry calls it, the operating room. And we've got the best in the world. And that really does show through in these sales cycles and these competitive situations, and it's also why we win.

Now I'll give you fifth from what I've heard from one of the channel partners gave you guys complement. You don't take on more than you can deliver.

It's very true, Catharine. We really pride ourselves on not -- we underpromise and overdelivered. You've seen others in the industry do just the opposite. So we're proud of that track record. Again, gets back to kind of Five9's culture and our values and how we operate, and I'll stop there.

So the other question is -- so another question I got the last couple of days was really having to do with the fact that you have talked a lot about the mega deals and done well. But what about the mid-market? I mean, are you moving away from mid-market and just focusing that mark? And I mean, can you give us some reassurance that, that's still the overall piece of your strategy and what's your approach?

Yes, Catharine. Very good question. I'm really glad you asked it. If you look at that, we talk about march-up market, but that doesn't mean we're abandoning the -- as we call it, commercial portion of the market or the mid-market or the bread-and-butter enterprise. This is like any other market. There's a bell curve, right? And these mega wins, these $50 million ARR deals are at the tail. They are the largest of the large CCaaS opportunities. There's a lot more opportunities right in the middle of that bell curve, the $1 million to $5 million enterprise that are -- again, there are many more of those opportunities. We're closing a lot more of those, obviously. That is how we drive revenue growth. And that is what's in that backlog that we're so confident about our second half guide at this stage. And by the way, there's the other end of that tail, which is truly small businesses, and we still do very well in SMB and commercial. So it's a very diverse business from a target market perspective, which is good.

Which brings up Barry's favorite topic, consumer sentiment. So there's been a lot of discussion from Target, McDonald's, Walmart about how they're bringing their pricing down. And do you think this will improve some of the consumer sentiment that you've seen in some of your credit card reporting?

Yes. So first, let me set the stage. 17 verticals within Five9, third biggest and most exposed in terms of the macro and in terms of seasonality is our consumer vertical. And we've seen some weakness there, there's just no question about it. In the fourth quarter of '23, we saw a contraction on the discretionary part of that consumer vertical for the first time ever. Never seen that before. And we expected, based upon the credit card and debit card data, that Q1 would be weak, and it was weak. And if you look at that JPMorgan data, one of the biggest credit card issuers, it was nominal growth of 1%, 2%, actually it is negative in January. And on a real-term basis, which matters for us for transactions, it was negative. So what do we assume for the rest of this year? We've assumed that we'll be somewhat middling. No big step up, no big step down. We've done everything we possibly can. We've tortured that data. Is this is company that's providing services versus goods, no conclusion. Is there somebody who is -- is this a company that's got discretionary versus non-discretionary? No particular leanings there either. Is there somebody who sells full price versus discount? Also no indication. So we've done the best we can. We think we're being prudent. And provided the economy doesn't take a step down, then we're in pretty good shape for the rest of the year. Of course, should the economy do better, if that eventuality were to occur, we are spring-loaded to take advantage of that. We are spring-loaded because our logo retention on our enterprise side of our business, which is 88% of the total, is in the mid-90s. People don't do this heart surgery, even with the best surgeons, unless they really -- well, when you don't have the best surgeon, unless they really need to and it just does not happen that often. Longer term, we've got strong confidence in the dollar-based retention rate going back up to the 120s. Our reduction is mimicked by a lot of other software companies. Why do we feel so good about the long-term? Because of course, you're guiding further march-up market, international growth, FedRAMP, et cetera, a new market for us. But in particular, the million dollar-plus customers, which is really is more than half of our recurring revenue, those consistently currently and in the future grow faster than -- the last quarter reported, 109%. They just can afford to take advantage of all the AI opportunities. They make acquisitions, they grow organically, and that is going to be -- it's the fastest-growing part of our business, and we'll, by mix, help us get to that high-120 that we've been talking about before.

I understand. And then AI billing models and pricing, so there's just a lot of them that are evolving. I'm just trying to understand, typically, when we've spoken to you on different earnings calls, you've discussed how you have $400 a seat versus maybe $200 for a typical CCaaS seat. Do you see that sustaining? I mean, that's one of the questions I get quite frequently is -- won't that price come down as more AI is offered? So that's another.

Yes. Thank you for asking that, Catharine. And in fact, we see upside in that doubling, if you will, and it really comes down to ROI. Think about the labor arbitrage ROI. It's very simple. It's a no-brainer. When you're talking about the cost of a human agent, let's just say, again, it depends on geography, right, in terms of the cost to the brand for a human agent. But in many markets, that cost could be $40,000 to $50,000 in annual compensation, right? And you look at the -- even for a virtual agent, that $400 per port, which, by the way, we're pretty flexible on consumption-based pricing as well, and we're working on that on a case-by-case basis with many clients, which will actually result in probably more revenue per port. But at -- even at $400 per port, you do the math, multiply that by 12, it's a 10:1 ROI immediate, right? If your -- you're saving that labor cost and you're replacing it with software. That's a 10:1 ROI for our customer. So if you think about this AI opportunity and the price points, we actually believe that $400 could easily go much, much higher because most software companies don't do this philanthropically. When a customer sees an ROI that's even a 2:1 or 3:1 in the immediate, that's very compelling. So I think that's the most important data to pay attention to. Reminder also, we're adding AI products to the AI portfolio. We've got 9 SKUs today, and we're adding more and more every day. So that just takes up the revenue per interaction for us and the revenue per enterprise brand. And it's going to be a great opportunity. I think the other way to think about this is, I said this to Barry a few minutes ago, we look at this as a win-win-win. In the end of the day, if we help our brands, our customers deploy personalized CX with AI-driven technologies, the customer wins, right? They just had that labor arbitrage ROI, huge win. The consumer wins because they get personalized customer experience, and Five9 wins because our TAM expands. So it's a win-win-win.

Got it. And then the other -- last week, Friday, Barry to talk about the Microsoft entry. So would like to hear for the audience what your take is on their entry? And do you think it will be competitive or not with your capabilities?

Yes. I'll start, and Barry feel free to chime in, but -- or Jonathan. But -- look, we respect the heck out of Microsoft, right? They are a behemoth. They're a large company with a lot of resources. They've announced that product. But I guess there's a reality in CCaaS that is really best illustrated by a couple of examples, a couple of data points for everyone. And again, I'm not going to mention names here, but there was a hyperscaler that announced their entrant into the CCaaS market 7 years ago, 7. It seems like yesterday, but it's been 7 years. There's another company, a collaboration company that announced their entrance into the CCaaS market 3 years ago. And neither of them have the feature set that's required to win in these large mega enterprise replacements of on-premise Avaya, Cisco, Genesys, and deliver AI obviously. But there -- it is a high, high bar. We've seen this movie so many times, Catharine. And I think again, it's -- at the end of the day, it's kind of the ultimate endorsement of our market opportunity, that everyone wants to get into this space even though it's that hard, and they're going to learn how hard it really is. We're talking about thousands of features, hundreds of integration points, and many configurations of each of those features that you have to be capable. And the bar is very clear. If you can't replace that on-premise technology, you're not going to win in these large enterprise, mega deal opportunities, nor even in the $1 million to $5 million deals. And again, neither of those companies that announced 3 years and 7 years ago is competing with us head-to-head with an off-the-shelf CCaaS solution today. So those are good data points for everybody to just keep in mind. Now Microsoft is Microsoft, but we'll see as they mature their solution. But I think it's safe to say that they're going to probably be a similar movie to what we've seen in the past. I would say a couple of other things, Catharine. Contact center is different than UC. Microsoft commoditized the UC market because really for 2 reasons: low barrier to entry. It's very simple to build a UCaaS solution, so therefore, it's easy to get into that market with a viable solution. And it's a very price-sensitive market. In other words, CIOs will select a UC solution just sheerly based on price because it's a commodity. The UC market is the opposite end of the sector -- I mean, sorry, the contact center market is the opposite end of the spectrum than UC. It's a high barrier. We just talked about that, right. The barrier to entry, these thousands of features and hundreds of integrations and all the other things that we deliver, cross-channel, et cetera, as well as the AI, it's just a high, high barrier to entry, and that creates a very difficult opportunity for someone to come in and try and commoditize the market. It's a very good protective mechanism. It's why there are still only 3 of us competing for these large enterprise wins. And I would say secondly, the decision-makers, contact center CCaaS, CX decision-makers do not make decisions based on price. We actually see some of these very large wins that we're having. And again, there's -- yes, they're going to negotiate. But price is not the deciding factor in the end of the day. And that is also something that is very different than the UC market. So we see this, again, this announcement for what it is. Again, we take it seriously. But the third thing I'll point to is what we talked about -- we talked about professional services and implementation expertise, right? And we talked about the heart transplant and surgeons, and the necessary expertise to do this properly. I would just say this, I haven't seen that in Microsoft's DNA. It is a huge, huge part of why we win these large enterprise opportunities. And we'll see. It's just not something that they've shown a history of delivery. So I'll stop there.

Yes, if I could add just a couple of things to echo what Mike said, it's because -- just saying we're going to beat them because we have more features. When you look at a hyperscaler like Microsoft, that's something that's just a matter of time and money, and they clearly have more of that than we do. But it isn't just that, right? It's the expertise and the folks who use that software. And in many ways, the product we deliver is a combination of the software we write and the people who take it and work it to make it work for the business. In fact, much of the software we write, the user interfaces and the technology are used by our own employees to set the system up for usage by the customer, right? That's really unique and really hard and difficult to just throw software development money at. The second thing I'll say is, like, on the UC side, like it wasn't that easy for Microsoft even to get into the UC space. I mean, Teams is like attempt #3 at their efforts to do this. We had Lync, and that didn't work out and then they -- I was at Skype by the way when Microsoft bought Skype and so they built Skype for Business, and they didn't quite get there. And like third time's a charm, I guess? So if history is a predictor of the future, this is attempt #1 of 3 for them. So I mean, again, we're not resting on our laurels, like make no mistakes like we always have to continue to innovate and invest to compete and win. But I think we're well positioned.

So on the -- if I look at your funnel and I said, looked at the top of the funnel, would you say who do you compete against the most? I think that would be one thing I'd like to understand. And then part of the question is there's a lot of thought leaders out there that I went to the Avaya conference and said, "Oh, yes, they're not going to be a shared donor anymore. They've really changed things up." I'd just like to hear your opinion on the top of the funnel, who you compete against? And then where do you really see your opportunities in the premise-based world coming from?

Yes, Catharine, I'll net it out for you. It is still a 3-horse race in CCaaS and large enterprise CCaaS. And it's the same competitive set that has been there for quite some time, day in and day out. When we're talking about this Fortune 50 bank or any of these other large deals, even again, even the dolphins, even the $1 million to $5 million deals, it is the 3 of us that you've heard about over and over and over. Everyone is investing heavily in AI amongst the 3 of us. Again, we got that lead 4 years ago with the Inference acquisition. We've been building on top of that lead, and it is a key differentiator for us. But it is still a 3-horse race today. Now again, there are AI point solutions. We don't compete with them. We actually partner with some from time to time. If a customer wants to plug in a point solution, we'll charge a connector fee. We monetize that, but they have to be connected to a platform, as Jonathan already described, to really provide personalized CX across the entire CX journey, as opposed to just being a tunnel vision chat bot, if you want to call it that, right, that only knows what it knows. You have to know everything to breathe that AI brain, and you have to have access to all the platform, entry points and communication channels and integration points. Speaking of Avaya, I would just say, look, the on-premise market is still predominantly the market share is Avaya, Cisco, Genesys. And you've seen Avaya in and out of bankruptcy over the years multiple times. I've heard this same narrative from them. I've been here 16 years, Catharine, and I've heard that narrative for a long time from Avaya. The challenge that they have, quite frankly, comes back to talent and being able to hold on to talent. They change their strategy every couple of years because there's a bit of a revolving door there in terms of top talent and leadership. So it's one of those situations where we're going to continue to get a lot from Avaya. Genesys is end-of-life their on-premise solutions, and that announcement actually is what drove a lot of the inflection in our market opportunity about 5 quarters ago. And Cisco continues to not prioritize cloud. And so it's again, it's going to be an exciting, I'd say, 5 to 7 years. This may -- with this acceleration that's happening in the market, it may happen a little faster than that. But make no mistake, this is not a 1- to 2-year land grab. Now we're going to grab more than our fair share of what comes up for -- in an RFP or what comes up for grabs. But we do expect that to be a durable growth opportunity for several years.

Yes. One of the theses for me has always been international expansion for you all. So can you highlight where you are on international expansion, some strategy behind your sales motion and what key partners you like to work with to expand overseas?

Yes. Sure, Catharine. International expansion is 1 of our 3 growth strategies and it's working extremely well. Our international revenue growth is significantly higher than our domestic revenue growth, mainly because it's a wide-open market in many cases. Again, our competitors are there. They got there arguably before we did. But again, we're leveraging a lot of channel partners in Europe, Latin America, to name a couple of international territories. But again, we're now supporting so many multinational global companies that are also operating around the world. But it's been a very productive expansion opportunity for us over the last couple of years, but we still got a long way to go internationally in terms of that TAM that's available. And we're doing it through some key partners like BT, for example. We announced the BT partnership. And that's a 2-way partnership, and they've been leaning in, closing business with us, building pipeline with us and walking us into a lot of opportunities. And they're just one of literally hundreds of channel partners that we have globally.

So if I were to tick off your top 3 growth strategy, international is 1? AI?

I would say platform includes AI, right, but it's platform, international expansion and march-up market. Those are the 3 growth drivers that we've talked about for the last several quarters, and they remain. Obviously, AI becomes front and center in that platform growth driver. And we've been investing aggressively as Jonathan and his team have just been continuing to come up with new innovations like GenAI Studio. It's -- again, we talked about having the best surgeons and people in professional services. I would argue that we have the best minds in our engineering and product organizations when it comes to AI as well. And that is a big advantage.

Well, on the last earnings call, you also -- I was pretty impressed with how well your system integrator work is going and the opportunities going through there. And can you describe some of the changes you've made to that program and why you're seeing like 6 years ago or 4 -- even 3 years ago, you didn't have the same volume going through there as far as opportunities and what's changed that accelerated?

Yes, Catharine, thank you for asking that, too. It's -- about, I'd say, 18 months ago or so, we initiated a project called project pull-through. And what that is designed to do and has been working extremely well is to enable SIs and other third parties, VARs included, to actually do some of the implementation work. These professional services we're talking about, right, that heart surgery. Now obviously, we don't want to just give anyone the ability to hold a scalpel and do that open heart surgery. We're very selective, and we demand that these SIs and VARs invest and become experts in our platform and are able to do it at the same rate, at the same level in terms of customer sat, NPS scores, for example, that our professional services team delivers. And they're doing it. And we're actually seeing a majority of the implementations being done internationally, are being done by partners now, many of them SIs and a growing number here domestically as well. So it's working and the reason we call that project pull-through is because when these SIs and VARs know that the services revenue opportunity exists for them, that helps their business. And our partnerships become tighter, and they often now are leading and pulling us into opportunities since project pull-through. So it's been a very successful program, but we're still ramping it in all territories.

When you also say the fact that you moved up market, like maybe after the FedEx deal and the health care deal that you attracted some of these larger VARs like PCW, et cetera, and Accenture and maybe that helped bring them to you and you work with them? Would you say that was a piece of it?

It's absolutely true, Catharine. I mean, this is -- there's a chicken and egg element to this, right, in terms of success breeds success, if you will. And the more we have success upmarket, the more people notice, and SIs included, right? So these large mega wins are very good from not just customer reference checks, but also partner reference checks. And the fact that we're having success upmarket really helps these SIs realize how big this market opportunity is. And they quite frankly want a piece of it. And they want to do -- they want to go to market with the best partner.

Okay. The last question, what keeps you up at night?

Well, just I would say general insomnia. I'm kidding, Catharine. As we -- all age, it gets harder and harder to sleep at night. But I would say not a whole lot. We are so excited about where we sit in this market opportunity. We do believe that the market is going to become efficient very soon around this AI opportunity and the fact that this is a tailwind for us. So I'd say the 1 thing that keeps me occupied at night is just trying to help people understand the reality of the tailwind for our business from AI. And I think again, I expect the market to become efficient over time, it always does. And the herd mentality exists in a lot of places, and it definitely exists in the markets. And I think there's going to be a flip of the switch here at some point very soon.

I also -- I always enjoy working with your team, so thank you for your time today. Jonathan, nice to see you.

Thank you, Catharine. We really appreciate your time and energy on this.

Thank you, Catharine.

Yes.